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1、,Accounting and Reporting Income Taxes,Chapter 19,Intermediate Accounting 12th Edition Kieso, Weygandt, and Warfield,Prepared by Coby Harmon, University of California, Santa Barbara,Fundamentals of Accounting for Income Taxes,Future taxable amounts and deferred taxes Future deductible amounts and de
2、ferred taxes Income statement presentation Specific differences Rate considerations,Accounting for Net Operating Losses,Financial Statement Presentation,Review of Asset-Liability Method,Loss carryback Loss carryforward Loss carryback example Loss carryforward example,Balance sheet Income statement,A
3、ccounting for Income Taxes,Corporations must file income tax returns following the guidelines developed by the Internal Revenue Service (IRS), thus they:,LO 1 Identify differences between pretax financial income and taxable income.,Fundamentals of Accounting for Income Taxes,calculate taxes payable
4、based upon IRS code, calculate income tax expense based upon GAAP.,Amount reported as tax expense will often differ from the amount of taxes payable to the IRS.,Tax Code,Exchanges,Investors and Creditors,Financial Statements,Pretax Financial Income,GAAP,Income Tax Expense,Taxable Income,Income Tax P
5、ayable,Tax Return,vs.,IRS,Fundamentals of Accounting for Income Taxes,LO 1 Identify differences between pretax financial income and taxable income.,Illustration Assume the company reports revenue in 2007, 2008, and 2009 of $130,000, respectively. The revenue is reported the same for both GAAP and ta
6、x purposes. For simplification, assume the company reports one expense, depreciation, over the three years applying the straight-line method for financial reporting purposes (GAAP) and MACRS (IRS) for the tax return. What is the effect on the accounts of using the two different depreciation methods?
7、,LO 1 Identify differences between pretax financial income and taxable income.,Fundamentals of Accounting for Income Taxes,Revenues,Expenses (S/L depreciation),Pretax financial income,Income tax expense (40%),$130,000,30,000,$100,000,$40,000,$130,000,2008,30,000,$100,000,$40,000,$130,000,2009,30,000
8、,$100,000,$40,000,$390,000,Total,90,000,$300,000,$120,000,GAAP Reporting,Revenues,Expenses (MACRS depreciation),Pretax financial income,Income tax payable (40%),$130,000,2007,40,000,$90,000,$36,000,$130,000,2008,30,000,$100,000,$40,000,$130,000,2009,20,000,$110,000,$44,000,$390,000,Total,90,000,$300
9、,000,$120,000,Tax Reporting,2007,LO 1 Identify differences between pretax financial income and taxable income.,Book vs. Tax Difference,Income tax expense (GAAP),Income tax payable (IRS),Difference,$40,000,36,000,$4,000,$40,000,2008,40,000,$0,$40,000,2009,44,000,$(4,000),$120,000,Total,120,000,$0,Com
10、parison,2007,Are the differences accounted for in the financial statements?,Year,Reporting Requirement,2007,2008,2009,Deferred tax liability account increased to $4,000,No change in deferred tax liability account,Deferred tax liability account reduced by $4,000,Yes,LO 1 Identify differences between
11、pretax financial income and taxable income.,Book vs. Tax Difference,Balance Sheet,Assets:,Liabilities:,Equity:,Income tax expense 40,000,Income Statement,Revenues:,Expenses:,Net income (loss),2007,2007,Deferred taxes 4,000,Where does the “deferred tax liability” get reported in the financial stateme
12、nts?,Income tax payable 36,000,LO 1 Identify differences between pretax financial income and taxable income.,Financial Reporting for 2007,A Temporary Difference is the difference between the tax basis of an asset or liability and its reported (carrying or book) amount in the financial statements tha
13、t will result in taxable amounts or deductible amounts in future years.,Future Taxable Amounts,Future Deductible Amounts,Deferred Tax Liability represents the increase in taxes payable in future years as a result of taxable temporary differences existing at the end of the current year.,Deferred Tax
14、Asset represents the increase in taxes refundable (or saved) in future years as a result of deductible temporary differences existing at the end of the current year.,Illustration 19-22 Examples of Temporary Differences,LO 2 Describe a temporary difference that results in future taxable amounts.,Temp
15、orary Differences,E19-1 South Carolina Corporation has one temporary difference at the end of 2007 that will reverse and cause taxable amounts of $55,000 in 2008, $60,000 in 2009, and $65,000 in 2010. South Carolinas pretax financial income for 2007 is $300,000, and the tax rate is 30% for all years
16、. There are no deferred taxes at the beginning of 2007. Instructions Compute taxable income and income taxes payable for 2007. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2007.,LO 2 Describe a temporary difference that results in future taxable amounts.,Future Taxable Amounts and Deferred Taxes,LO 2 Describe a temporary difference that results in future taxable amounts.,
